Flexible Budgets and Standard Costs

Chapter 23

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In a flexible budget, which parameter is varied?
1. Fixed cost
2. Sales volume
3. Unit variable cost
4. Unit revenue

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Answer: 2

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In a flexible budget, as sales volume increases

1. Total fixed costs rise

2. Total variable costs decrease
3. Operating income increases
4. Relevant range increases

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Answer: 3

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The flexible budget variance shows

1. Actual results for actual sales volume

2. Actual results for budgeted volume
3. Budgeted results for budgeted volume
4. Budgeted results for actual volume

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Answer: 4

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Standard costs are used to

1. Control expenditures for direct materials

2. Estimate labor rates
3. Allocate management overhead costs
4. All of the above

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Answer: 4

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5. A carefully predetermined cost that usually is
expressed on a per unit basis is called a(n):

1. applied cost
2. standard cost
3. flexible cost
4. fixed cost

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Answer: 2

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The cost incurred to have inventory shipping in
1. is included in the standard cost of direct
materials
2. is not included in the standard cost of direct
materials
3. is a selling expense
4. is ignored in a standard cost system

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Answer: 1

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Given the following direct labor cost results:
Actual cost @ actual volume = $1,800
Standard cost @ actual volume = $1,300
Standard cost @ Standard volume = $1,100

Calculate the cost variance for direct labor

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Answer:
Cost variance = $1,800 - $1,300 = $500 (U)

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Given the following direct labor cost results:
Actual cost @ actual volume = $1,800
Standard cost @ actual volume = $1,300
Standard cost @ standard volume = $1,100

Calculate the efficiency variance for direct labor

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Answer:
Efficiency Variance = $1,300 - $1100 = $200 (U)

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Given:
Actual total overhead cost for actual volume = $22,000
Standard total overhead cost for actual volume = $20,000

Calculate total manufacturing overhead variance

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Answer:
Total manufacturing overhead variance =
$22,000 - $20,000 = $2,000 (U)

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 An unfavorable materials quantity variance occurs when
1. actual amounts of materials used are greater than the
standard amounts allowed
2. actual amounts of materials used are less than the
standard amounts allowed
3. actual costs of materials used are greater than the
standard costs allowed
4. actual costs of materials used are less than the standard
costs allowed

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Answer: 1

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To record purchase of direct materials in a
standard cost system, debit direct material
inventory at:
1. Actual cost, actual quantity
2. Actual cost, standard quantity
3. Standard cost, actual quantity
4. Standard, standard quantity

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Answer: 3
Purchase of inventory is recorded at standard cost
for the actual quantity purchased.

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Copyright © 2007 Prentice-Hall. All rights reserved